The State Bank of Vietnam (SBV) on September 30 raised selling rate of US dollar by VND225 to VND23,925.

Trading of the US dollar at a Sai Gon-Ha Noi Commercial Bank's office in Hanoi. Photo: Pham Hung/ The Hanoi Times

Since the beginning of the year, the State bank has raised the VND/USD exchange rate four times with a total increase of VND905 or 3.9%.

On September 30, the SBV set its central VND/USD exchange rate at VND23,400. The central rate may move within a band of 3% on either side and it could reach as much as VND24,102 for a US dollar.

The VND/USD exchange rate in commercial banks also increased following the move of the SBV.

The exchange rate at the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was up VND60 a dollar to VND24,010 for a US dollar on a daily basis. At the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) and the Asia Commercial Bank (ACB), the exchange rate was above VND24,000 for a US dollar.

By raising the VND/USD exchange rate, the State bank is trying to find a new balance between the two currencies, an expert told online magazine VnEconomy.

Demand for US dollar is high at the end of the year, mostly because enterprises are due to settle their payments and debts with international partners, he said.

A number of companies have delayed their payments to wait for the VND/USD exchange rate to cool down while some of them want to buy in US dollar to prepare for transactions in the future, he added.

However, the supply of foreign currency is weak as USD-based incomes from foreign capital, remittances, sales of international bonds, and sales of assets to foreign investors are low, the expert said.

Foreign currency reserves are the only source of US dollar at the moment, so the SBV has to take control of the supply and spend it on really necessary demands, he said.

The VND/USD exchange rate has been under pressure from a stronger US dollar since the Federal Reserves on September 21 decided to raise interest rates by 0.75 percentage points to the range of 3.00%-3.25% amid fears of strong inflation and economic crisis.

The US dollar index, showing the power of the greenback, increased from near 109.74 points on September 19 to 114.10 points on September 27. The index stood at 112.17 points on September 30.

Amid the low supply of the US dollar, the SBV has requested commercial banks and branches of foreign banks to tighten their management of foreign currency supply to prevent illegal trading and transactions.

Accordingly, commercial banks and foreign banks have to take a close watch on cross-border settlement and transactions, individual services, and monitor the sale of foreign currencies in cash and certification for individuals to carry the cash overseas.